New doubts on Pumpkin Patch’s global expansion as market turmoil grows

Children’s clothing company Pumpkin Patch is reviewing international expansion, in the face of terrible market conditions in the northern hemisphere.

The company today posted a 27.5 percent decline in full year net profit to $17.1 million, citing higher interest charges, higher quota costs and a difficult United States retail environment as key culprits.
Like much of the retail sector, most of the problems occurred in the second half 2008.

While Australian retail earnings increased 15.9 per cent to $41.2 million, New Zealand EBIT grew just 0.2 per cent to $12.7m.

The company also had some supply chain and inventory issues that “meant some sales opportunities were lost in the first half.”

The US market was particularly difficult, with the company posting an EBIT loss of $8.9 million.

The US retail environment had been tough, with conditions difficult for new entrants who did not have an established brand presence.

“Such conditions are difficult for new entrants who do not have an established brand presence,” says executive chairman Greg Muir.

Australian and New Zealand markets are expected to weather deteriorating market conditions through brand identification, a luxury not afforded to the northern hemisphere operations, he added.
The difficult conditions in the northern hemisphere means the company is reviewing its store rollout procedures.

In the UK the company posting an EBIT loss of $2.4 million, compared to last year’s $1.2 million.

“The Company will maintain its normal disciplined approach to site selection and new stores will only be considered when landlord contributions significantly cover capital expenditure costs. Currently one new store has been committed to for 2009,” Mr Muir says.

Back home the company plans to open 4 more stores in Australia, plus one outlet store, and a further four in New Zealand plus three outlet stores.

expects margins to suffer until retail conditions improve near the 2010 financial year.

The company expects margins to suffer until retail conditions improve near the 2010 financial year.

The US market was described as posting “EBIT losses for the foreseeable future.”

The company offered a dividend of 3.5c a share.

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